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These frequently asked questions (FAQs) give you answers to common questions about the new Financial and Prudential Standards (new Standards).
The new Standards will replace the current Financial and Prudential Standards from 1 November 2025. They apply to registered aged care providers and set minimum requirements for good financial and prudential management. This makes sure providers are financially stable and can deliver aged care services long term.
If you can’t find the answer to your question here, please email us at our dedicated inbox: New_FP_Standards@agedcarequality.gov.au
The new Financial and Prudential Standards
Why is the Commission developing new Financial and Prudential Standards?
In July 2023, we took over the financial and prudential regulation of aged care from the Department of Health, Disability and Ageing.
As part of this responsibility, we are developing new Financial and Prudential Standards to replace the current Standards under the new Aged Care Act.
What are the new Standards?
There are 3 new Standards:
- Financial and Prudential Management Standard
- Investment Standard
- Liquidity Standard.
These will replace the 4 current Standards (Governance Standard, Liquidity Standard, Disclosure Standard, Records Standard).
What has happened to the requirements under the current Records and Disclosure Standards?
The requirements from the Records Standard and Disclosure Standard are now included in the Aged Care Rules. This brings together similar reporting and disclosure processes.
The Department of Health, Disability and Ageing is currently drafting the Rules, and they will soon be available for public consultation.
What do the new Financial and Prudential Standards do?
The new Standards set minimum requirements for good financial and prudential management for registered aged care providers. They make sure providers are financially stable and sustainable so they can provide long-term care for older people.
The Standards make sure that a provider’s governing body:
- manages finances responsibly
- considers how its decisions affect the wellbeing of older people receiving care.
The Standards make sure that providers:
- have enough funds to meet the conditions of their registration and to pay bills, refunds and debts
- can provide consistent, safe and high-quality services
- can manage financial stress by showing that they comply with their minimum liquidity amount.
- can provide ongoing and continuous care for older people by making sure financial or operational challenges don’t affect the quality of their services
- protect refundable deposit balances by properly managing these funds.
The Standards reduce financial risks to the Australian Government , including claims on the Accommodation Payment Guarantee Scheme.
What do the new Standards mean for older people?
The new Standards mean that older people can be confident that their provider is managing finances responsibly and considering how decisions will impact their wellbeing. Good financial management is important for providers to continue to deliver safe, high-quality care.
Financial and Prudential Management Standard
This Standard makes sure providers have systems and strategies to:
- manage finances well
- make financial and prudential decisions that are fair, reasonable and in the best interests of people receiving care.
Investment Standard
This Standard makes sure providers responsibly select, manage and monitor their investments, including refundable deposits, so they can continue to deliver safe, high-quality aged care.
Liquidity Standard
This Standard makes sure providers:
- have enough money on hand to cover unexpected expenses
- can repay refundable deposits on time and in full.
What are the main changes between the current and the new Standards?
The 3 new Standards (Financial and Prudential Management Standard, Investment Standard and Liquidity Standard) will replace the 4 current Standards (Governance Standard, Liquidity Standard, Disclosure Standard, Records Standard). The requirements under the current Records Standard and Disclosure Standard have been moved into the Rules, to keep all reporting and disclosure requirements together.
Key changes include:
Minimum liquidity requirements
The Liquidity Standard now includes an enforceable minimum liquidity amount for all residential aged care providers, tailored to their circumstances.
A liquidity amount is an amount that you can quickly turn into cash when you need it.
Providers must calculate their minimum liquidity amount each quarter, using this formula:
- 35% of quarterly cash expenses
- + 10% of refundable deposit liabilities (if holding refundable deposits).
New obligations for home care services providers
Home care service providers (in categories 4 and 5) must now comply with the Financial and Prudential Standards, specifically the Financial and Prudential Management Standard. However, they do not need to meet the Liquidity or Investment Standards - these Standards, which only apply to residential aged care providers.
Liquidity requirements for all residential aged care providers
All residential care providers must comply with the new Liquidity Standard requirements, even if they do not hold refundable deposits.
Enhanced financial reporting and risk management
There are extra requirements for financial reporting, investment decisions and managing risk to improve transparency and governance practices.
Will you independently evaluate the impact of the new Financial and Prudential standards, and will you publish the results?
Under the new Aged Care Act, the Minister must start an independent review on the Act within 6 months of the third anniversary of its start date (Section 601 Aged Care Act 2024).
Before this review, we will also be regularly monitoring and communicating with the sector to make sure providers understand and are complying with the Standards.
Under the new Act, the Aged Care Quality and Safety Commissioner can, in consultation with the System Governor, the Department of Health, Disability and Ageing, make changes to the Financial and Prudential Standards.
Do the Standards apply to Multi-Purpose Services (MPS)?
The new Standards don’t apply to Government organisations, which covers most MPS providers. However, non-Government MPS providers must comply with the new Standards.
We will work with these providers to help them understand and meet these requirements.
Do the new Standards apply to state government run providers?
No. The new Financial and Prudential Standards don’t apply to government organisations and local government authority providers.
If you’re not sure if your organisation is a government organisation or local government authority provider, you can:
- log into the Government Provider Management System (GPMS) and check your incorporation details
- search for your organisation in the Australian Business Register to confirm its status.
Financial and Prudential Management Standard
Who does the Financial and Prudential Management Standard apply to?
Registered providers in categories 4, 5 and 6 (excluding government entities and local government authorities), including:
- providers delivering funded aged care services in residential homes
- providers delivering funded aged care services in categories 4 and 5 in the community.
Do providers need to use a specific set of policies, procedures and systems to meet the Standards?
We know that each provider is unique and that they will have different financial and management systems, resources and ways to meet the new Standards.
The Standards have a broad set of objectives and requirements that providers need to meet. We understand that all providers will develop their policies, procedures and financial and management systems in a way that works best for them and the resources they have.
We don’t expect a one-size-fits-all approach. We’re focused on making sure that your policies, procedures and financial and management systems support you to meet the requirements and outcomes of each Standard.
All providers, no matter their size or location, need to have strong, thorough written governance policies, procedures, and financial and management systems, for each of the Standards. We want to see that you have a clear investment management strategy (IMS) and liquidity management strategy (LMS) and financial management policies.
Refundable deposits
Who is responsible for repaying refundable deposits if they’re loaned to, invested through, or held by a third party?
The requirements for repaying refundable deposits, and their permitted uses, haven’t changed.
You can only transfer refundable deposits to third parties in line with the current permitted uses. It’s the provider’s responsibility to repay refundable deposits when they’re due.
Will the new Standards affect how long a provider has to repay a refundable deposit?
The Department of Health, Disability and Ageing (department) will set out the requirements for taking, managing and repaying refundable deposits in the Rules and the Aged Care Act. Further details can be found on the department’s website as the Rules are released for public consultation. This is happening in stages.
What are ‘refundable retirement village payments’ and ‘refundable independent living payments’?
These are payments a resident makes to secure a retirement village or independent living unit.
They are repayable deposits held by the provider on behalf of the resident.
While these payments are not regulated under the Aged Care Act, they are considered in the liquidity requirements because they:
- are a significant cash liability for these organisations
- have similar features and risks as aged care refundable deposits.
For this reason, refundable retirement village and independent living payments are included in the minimum liquidity amount calculation.
Investment Standard
Who does the Investment Standard apply to?
Registered providers delivering funded aged care services
in an approved residential care home (excluding government entities and local government authorities).
Why do providers need an investment management strategy for all their investments, not just for refundable deposits?
Many registered providers hold significant amounts of money and invest in a range of products. By having a written investment management strategy, providers can show us that they have clear investment objectives and effective risk management.
Taking a strategic approach to the management of your investments across your whole organisation will help you:
- be financially stable
- have stronger governance
- protect refundable accommodation deposits.
What makes a person qualified to manage investments under the new Investment Standard?
Registered providers should decide and clearly set out the accountabilities and responsibilities for each role in their organisation. In developing the requirements of each role, providers can make sure that they have people with the appropriate skills and experience.
This principle is set out in the new Financial and Prudential Standards under the Financial and Prudential Management Standard and the Investment Standard. It requires registered providers to clearly set out the accountabilities and responsibilities for managing their finances.
When managing investments, each registered provider will have a system or approach that considers a range of factors, including the size of the organisation and its appetite for risk. Each provider should:
- carefully consider the scope and how complex the role is to manage the organisation’s investments
- make sure the person they employ in the role has the appropriate skills and experience.
For example, the requirements for the role will be very different for a provider that holds a large portfolio of investments compared to a provider with a small investment holding. The large portfolio might need managing through sophisticated treasury processes, while the small portfolio might be invested in a single investment product.
A registered provider must make sure that each person involved in carrying out the strategy has the appropriate skills and experience. These staff need to know and understand their role, accountabilities and responsibilities.
Liquidity Standard
Who does the Liquidity Standard apply to?
Registered providers that are providing funded aged care services in a residential care home (excluding government entities and local government authorities).
This Standard does not apply to home services providers.
Are you aware of the impact the minimum liquidity amount may have on the sector?
The aged care sector is diverse. We accept that sometimes meeting the minimum liquidity amount will mean that providers don’t have access to as much capital as they would like in order to make investments. We believe the minimum liquidity amount is a necessary compromise between holding liquid assets to maintain financial viability and making longer term investments.
Why do we need a minimum liquidity amount?
Your liquidity amount is the amount of assets that you can quickly turn into cash. Liquidity levels can vary a lot from provider to provider. This means that some providers are vulnerable to short-term cashflow issues caused by:
- decreased occupancy
- increased spending
- higher-than-usual levels of refundable accommodation deposit repayments.
Without a minimum liquidity amount, providers might not have enough access to cash or cash equivalents at these times. (Cash and cash equivalents are also called liquid assets, which means assets that you can quickly turn into cash). This is an issue because it can:
- lead to cost cutting that affects service quality
- risk providers’ ability to refund refundable deposits.
The suggested minimum liquidity amount in the new Liquidity Standard was developed to respond to these issues. It also meets the Royal Commission into Aged Care Quality and Safety’s recommendation to have enforceable liquidity requirements.
What is the definition of a cash expense?
Cash expenses include:
- salaries and employee benefits (labour expenses)
- management fees
- finance
- interest expenses
- rent
- other expenses (as defined in the Quarterly Financial Report income statement).
Non-cash items, such as depreciation, amortisation and written down values of assets, are not cash expenses and you shouldn’t include them in the liquidity calculation.
Does the minimum liquidity amount apply to my entire organisation if my corporate structure has multiple services, such as residential care, home care, retirement living, charities, government services?
In setting a minimum liquidity amount, our analysis considered the impacts of all cash inflows and outflows on a registered provider organisation. This was whether those cashflows were directly related to aged care operations or not. This allowed us to decide the overall minimum liquidity the organisation needs to hold to manage unexpected cash flow shocks while providing an appropriate level of care.
When calculating the minimum liquidity amount for your organisation, registered providers should include:
- all cash expenses for their organisation, not just those related to the providing residential aged care
- all relevant financial information (total cash expenses and refundable deposit holdings).
How will you regulate group structures?
We know that many providers operate in a range of structures from simple to complex. For example, some have several related entities or are within multiple provider organisations.
We often work with providers to understand their structures and the unique ways they work.
Each registered provider must meet all its regulatory responsibilities, whether it is a single registered provider, or part of a larger group.
It’s the responsibility of each registered provider to show that it holds, or has arrangements to meet, the minimum liquidity amount.
What is a cash equivalent?
Cash equivalents are short-term investments that are highly liquid. That means providers can quickly turn them into a known amount of cash. They have a low risk of losing value.
Our compliance approach
How will the Commission regulate the new Standards?
If a provider doesn’t meet their new requirements, we’ll:
- contact them directly
- work with those who want to comply to help them strengthen their financial governance and make the changes
- only resort to using our regulatory powers where a provider demonstrates a lack of commitment to managing risk.
Transition from the current Standards to the new Standards
How will the Commission manage compliance during the transition to the new Standards?
The new Financial and Prudential Standards take effect from 1 November 2025.
We will continue to enforce the existing Standards until November 2025.
Providers should continue to comply with the existing requirements and prepare for the transition. There will be some flexibility as you adapt to the new Standards.
To help with the transition to the new Standards, we will:
- provide information to help you understand and implement the new requirements
- support providers that have compliance issues
- regulate in a way that is in proportion and based on the risk people receiving care face.
Is the current advice on financial and prudential requirements still valid?
Yes.
Any advice given during a financial review or audit is valid until 1 November 2025, when the new Standards take effect.
If you have more questions about the new Standards or need help, please email us at New_FP_Standards@agedcarequality.gov.au
How and when will I know which registration category I am in?
Please visit the Department of Health, Disability and Ageing’s website, and our own website, to see the latest information on registration categories and the registration category process.
How will the new Standards affect providers’ financial reporting for this financial year?
For the 2024–2025 financial year, providers will submit their financial reports, including the Annual Prudential Compliance Report, under the current Aged Care Act and Financial and Prudential Standards.
For the 2025–26 financial year, providers will need to follow the new Financial and Prudential Standards when submitting their financial reports. We will develop detailed information on what each provider in each registration category will need to complete before you need to submit reports for 2025–26.
The current reporting requirements for the Annual Prudential Compliance Statement set out currently in the Disclosure Standard will be moved into the Rules.
The Rules will also contain other reporting requirements including the Aged Care Financial Report and the Quarterly Financial Report.
The Rules will be available for public consultation in stages on the Department of Health, Disability and Ageing’s website. This will include the reporting requirements and the providers that need to submit each report.
What impact will the new standards have on registered providers that the Commission is doing an audit with that started before 1 November 2025?
We will complete our prudential audit and targeted review activities for this financial year using the current legislation and standards.
A targeted review or audit is an opportunity for us and providers to identify and discuss changes a provider needs to make to improve current practices and meet future regulatory responsibilities. We’re already starting to talk to providers about how they might be able to strengthen their current arrangements to prepare for the new standards. We’ll continue to do this over the next couple of months.
We’ll carry out future targeted reviews and audit programs using similar principles and methods to those we currently use. You can find more information on our Targeted reviews and audits webpage.
We’ll continue to regulate in a way that is in proportion and based on the risk people receiving care face. We'll work with providers to help them reduce these risks and become compliant.
Will there be a transition period for providers with the new Financial and Prudential Standards?
The new Financial and Prudential Standards start on 1 November 2025.
We will continue to enforce the existing Standards until 30 June 2025.
Providers should continue to comply with the existing requirements and prepare for the change. There will be some flexibility as you adapt to the new Standards.
The changes build on existing good practices in the sector. We know that most organisations already have systems, policies and procedures in place to meet their financial and prudential responsibilities. We also know that most providers already exceed the minimum liquidity amount that they must hold.
We’ll always regulate compliance in a way that is in proportion and based on the risk people receiving care face. In practice, that means that where we see proof that a provider is committed to fixing non-compliance and shows they’re willing to work with us, there’s generally no need for us to use our powers to force action.
Where we think that a provider isn’t taking their financial responsibilities seriously, we’ll consider taking compliance action. We’ll also do this if there’s a history of the provider making promises and not keeping them. It won’t be a surprise, as we would’ve been talking to them about our concerns.
Our focus is on the outcomes that we have designed the responsibilities to deliver. We want to see that registered providers can manage risks that might affect quality, safety and sustainability of care. How we work to achieve that very much depends on how a provider decides to work with us.
When will we need to report against the new Financial and Prudential Standards (and for which reporting period)?
We expect the new Financial and Prudential Standards to start on 1 November 2025.
You will need to comply with these standards, including the minimum liquidity amount, from 1 November 2025.
The minimum liquidity amount will be based on expenses and refundable deposit holdings, following your Quarterly Financial Report for quarter 4 of 2024-25.
The first Annual Prudential Reporting Statement (APCS) will not be due until 2026. At this time, we will update the APCS to reflect the new Financial and Prudential Standards.
Will providers’ non-compliances and registration conditions affect their star rating? Will star ratings or other information be published?
A provider’s star rating can change when we take formal compliance action and issue a regulatory notice.
Our goal is to work with providers to help them meet their regulatory obligations. If a provider isn’t meeting their obligations, we contact them to discuss the issues and help them make changes.
If the provider wants to talk with us and manage risk, we work with them to strengthen their systems and governance.
If a provider doesn’t try to address concerns or comply, we can issue formal notices. That will affect the provider’s star rating. The Department of Health, Disability and Ageing publish star ratings and other information about providers On the My Aged Care website.
Will the new Standards affect the skills that governing bodies need?
Yes. The new Financial and Prudential Standards expect more from governing bodies including the skills and responsibilities of people leading and managing aged care providers.
Registered providers must:
- clearly set out the accountabilities and responsibilities of each role in their organisation
- make sure that people in key roles – particularly in financial governance – have the right skills and experience
- develop the requirements of each role so that the person’s capabilities match the complexity of the role
- make sure people understand their roles and responsibilities.
These requirements are in the Financial and Prudential Management Standard and the Investment Standard.
More information
If you have more questions about the new Standards or need help, please email us at New_FP_Standards@agedcarequality.gov.au
If you’re confused about what a term means, you can find definitions in the Financial and Prudential Standards – consultation draft.
You can find information about fees or subsidies, charging and refunding refundable deposits, and accommodation payments on the Department of Health and Ageing website.
